A trademark owner can of course sue the business selling counterfeit copies of the trademark owner’s goods, but it may also sue other businesses that sufficiently provide products or services which the counterfeiter uses. In Luxottica Group, S.p.A. v. Airport Mini Mall, LLC, 932 F.3d 1303 (2019), the United States Court of Appeals for the Eleventh Circuit recently confirmed that a landlord can be held liable for the trademark infringement of its tenant when the landlord has actual or constructive knowledge of a tenant’s counterfeiting activities. Peter Mavrick is a Miami business litigation attorney who represents clients in trademark infringement litigation and other unfair competition litigation.
The Lanham Act allows trademark owners to sue businesses that “use in commerce any reproduction, copy, or […] imitation” of a mark when that use is “likely to cause confusion” with the trademark owner’s mark. 15 U.S.C. § 1114(1)(a); Dieter v. B & H Indus. of S.W. Fla., Inc., 880 F.2d 322 (11th Cir.1989). In such a situation, a trademark owner can recover the profits that the infringer earned and the damages that the owner suffered due to the infringement. 15 U.S.C. § 1117(a). When the product being sold has a mark that is “identical” or “substantially indistinguishable” from the trademark owner’s mark, it may be considered as a “counterfeit.” 15 U.S.C. § 1127. The stakes are much higher for sellers of counterfeit products – a counterfeiter will likely be required to pay attorneys’ fees and either treble damages or statutory damages, which could be up to $2,000,000. 15 U.S.C. 1117(b)-(c). When a business is selling counterfeits, it is not necessary to prove that the violating business was acting in bad faith. Chanel, Inc. v. Italian Activewear of Florida, Inc., 931 F.2d 1472 (11th Cir. 1991).
A business can also be held liable for the enhanced counterfeiter penalties for supplying goods or services to counterfeiters. Particularly, a business can be contributing to counterfeiting if it “provid[es] goods or services necessary to the commission of a [counterfeiting], with the intent that the recipient of the goods or services would put the goods or services to use in [counterfeiting].” 15 U.S.C.A. § 1117(b)(2).
A business can contribute in the commission of counterfeiting, subjecting itself to significant penalties, if it sufficiently contributes to another’s violation of trademark law. The United States Supreme Court established in Inwood Laboratories, Inc. v. Ives Laboratories, Inc., 456 U.S. 844 (1982), that a drug company legitimately selling a generic drug can be held liable for counterfeiting when pharmacists mislabeled the drug company’s generic pills to appear to be the brand name capsules. The Supreme Court found that when a “manufacturer or distributor […] continues to supply its product to one whom it knows or has reason to know is engaging in trademark infringement, the manufacturer or distributor is contributorily responsible for any harm done as a result of the deceit.” Id. at 854. Even though the drug manufacturer did not make any additional money for counterfeiting, the act of providing the generic medicine when it knew it would be mislabeled was sufficient to find liability as a contributor to counterfeiting of a trademark.
The doctrine of contributory trademark infringement has expanded since the Supreme Court’s decision in Inwood Laboratories. In Luxottica Group, S.p.A. v. Airport Mini Mall, LLC, 932 F.3d 1303 (11th Cir. 2019), a landlord leased stores and booths to tenants at a discount mall. Several incidents occurred that should have indicated to the landlord that its tenants were counterfeiting products. Some of the tenants were raided by law enforcement and had thousands of counterfeit sunglasses and other goods seized. Id. at 1308. The landlord knew about the raids, and its property manager walked through the mall to inventory what was taken. Id. at 1309. The landlord received a letter from the owner of the trademark which identified the booths which were selling counterfeit goods. Id. at 1310. The Luxottica court also found that a person may receive constructive knowledge of trademark infringement when the person notices a product sold for significantly less than its normal retail value. In that case, the landlord should have been able to notice that Oakley sunglasses, which normally retail for $140-$220 a pair, were being sold for $15-$20 by a few of the tenants.
The federal appellate court in Luxottica determined that “turning a blind eye” can be sufficient for a finding of contributory trademark infringement. To be liable, “a service provider must have more than a general knowledge or reason to know that its service is being used to sell counterfeit goods. Some contemporary knowledge of which particular listings are infringing or will infringe in the future is necessary.” Id., quoting Tiffany (NJ) Inc. v. eBay Inc., 600 F.3d 93 (2d Cir. 2010). The landlord in Luxottica was found liable for $1.9 million in damages because of its contributory trademark infringement.
Although a businesses does not have a general duty to investigate everything that a customer or tenant is doing, a business risks violating the Lanham Act if it provides any goods or services to a business that it knows, or should know, is counterfeiting goods. To avoid liability, a business may have to cease selling to a customer or terminate a lease if it discovers that its customer or tenant is counterfeiting products. To be safe, a business would be prudent to investigate claims that its customers or tenants are counterfeiting products.
Peter Mavrick is a Miami business litigation lawyer. This article is not a substitute for legal advice.